Page 61 - Nigeriaone mag 2 edition en

Benefits of Oil to Developing Countries

The advocates of oil based development believe that countries that possess the precious resource of “black
gold” can base their economic development on this resource. They claim the potential benefits from
increased government revenues to poverty alleviation, improvement of infrastructure in roads, hospitals,
and schools, enhancement of economic growth and creation of jobs, the transfer of technology, and
encouragement of related industries. Taxes, royalties and revenues from the oil industry in Nigeria have
made possible massive socio-economic and infrastructural development throughout the country; this single
industry continues to be the most important contributor to the national treasury.
Oil evidently is a beneficial resource to society. Oil as a commodity serves a wide variety of purposes, which
include heating, transportation, electricity, and industrial applications, and over 2000 products are derived
from it. Oil is a high energy density abundant fuel, which is relatively easy to transport and store, and is
extremely versatile in its end uses. Oil is also the most valuable commodity in world trade. “An estimated two
billion dollars a day now change hands in worldwide petroleum transactions. It is the world’s first trillion-
dollar industry in terms of annual dollar sales.” The oil industry is phenomenally profitable for some
corporations and governments. Taxes from oil are a major source of income for some 90 governments.
Petroleum is the largest single item in the balance of payments and exchanges between nations and a major
factor in local level politics regarding development, jobs, health, and the environment.

The huge earnings from crude oil since Nigeria’s
first export in 1959 have made the commodity a
centerpiece of the country’s economy. The
contribution of the oil sector in terms of its relative
shares of Nigeria’s Gross Domestic Product, total
government revenue and foreign exchange from
exports has been tremendous; growing perpetually
at an increasing rate. For example during the 1970-
1974, the average contribution of the oil sector to
Nigeria’s GDP was just about 17.94 percent. In the
decade of 1980s, it rose to an average of 20 percent,
and between 1990 and 1999 an average GDP growth
contribution of 35.66 percent was recorded. In the
last seven years, the share of the oil sector in
Nigeria’s GDP has risen to an average of well over
36.43 percent.
Petroleum revenue to the government which stood
at less than N0.3 million in 1958, steadily increased
to N3,724 million in 1974 and by 2007, it has risen
to well over N6,700,000 million. In terms of
percentage contribution relative to the agricultural
sector and the entire non-oil sector, the petroleum
sector contributed to over 80 percent of
government recurrent revenue in 1980; thereby
relegating the agricultural sector which contributed
to over 73 percent of government recurrent
The Niger Delta, in Nigeria, one of the most oil-rich regions revenue until 1970.

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